The Social Security Dilemma; When Foreclosure is a Good Thing; The Emerging Economies of the BRIC; Steven Slater: Hero or Hype?

Aired August 15, 2010 - 15:00 ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

ALI VELSHI, CNN ANCHOR: Dire warnings out this week that this economic recovery is not progressing as hoped. Welcome to YOUR MONEY, I'm Ali Velshi. Christine Romans is off this week. Let's get right into it. Stephen Moore, a good friend, editorial writer with The Wall Street Journal joins me now.

Stephen, we're three years into when this thing started. We should have been done with this financial crisis of the last few years, we are not. And the Federal Reserve just this last week warned that the recovery could be weakening, could be going backwards. And let's talk about this.

Are businesses hoarding money and not hiring? Is it people that are not spending money? Are we headed backwards or is there a real road to recovery ahead of us?

STEPHEN MOORE, THE WALL STREET JOURNAL: Hard to say, Ali, but we do know this. That the federal government, both through fiscal policy and monetary policy has thrown everything it has got at this recession. We've spent about a trillion and a half dollars in stimulus spending. The federal government has held interest rates close to zero. They've been printing money like it's Monopoly money.

And yet with all of this money and all this spending, we're not seeing the kind of robust recovery we'd expect to see in the third year of this recession.

VELSHI: Diane Lim Rogers joins me now. She is the chief economist with the Concord Coalition.

Diane, we used to describe this as a consumer-driven economy. We used to say two-thirds of our economy is determined by decisions that individuals make. Now people continue to be scared about losing their jobs because unemployment is still high, savings are more important than spending. What role is fear of a recovery or the lack of a recovery playing in this economic climate?

DIANE LIM ROGERS, CHIEF ECONOMIST, CONCORD COALITION: Well, I think there's a lot of uncertainty right now in the economy facing people in their everyday lives and when they look at what's going on in the federal government more generally and the economy more broadly.

I think we're sort of stuck in an endless do-loop. That, you know, consumers are waiting to start -- they don't want to start spending until they have a job, and then employers aren't hiring until they get the consumers to start buying their product.

So we're kind of stuck right now. And until there's a little bit more certainty on both the consumers' part and the business' part, I'm afraid we're going to be stuck in this holding pattern for a while.

(CROSSTALK)

MOORE: You know, Ali -- Ali, can I just say one thing? You know, yes, I agree with that. And you asked me this question, which is really the critical one. Why are corporations sitting on all of this cash right now, because you're right, by some estimates, $1 trillion to $2 trillion that companies are hoarding, they're not investing it, they're not expanding.

And I think it's -- the reason you were just talking about, that companies are very fearful about where this economy is headed. They're very fearful about Washington, about maybe "Obama-care," about the taxes that are coming next year, about regulatory uncertainty.

So all of those things are just putting everybody in a kind of hunker- down position. At least they're not...

(CROSSTALK)

VELSHI: I mean, we don't know why, because I've talked to a lot of companies, and some of them are just worried about getting into that credit crisis that we were in in 2008, where you have got to -- you know, a few hundred million in the bank, you spend it to open a factory, and all of a sudden we get back into a credit crisis.

I want to have money in my pocket. And I think -- let's bring Joe Queenan, because he is the closest we've got on this panel to a real consumer -- we're all real consumers, I guess, but Joe is an author and a satirist.

Joe, do you worry about this because you've got work? I mean, most Americans actually are employed. So why are we not driving this economy? Is it that we're scared that we're going to lose our jobs? Did you really care about all of these other things that my other guests are talking about?

JOE QUEENAN, SATIRIST: I think that from the very beginning of this recession we knew that this was not a conventional recession. Recessions last 18 months, maybe two years. We talked about this as the "great recession." This is going to last a long time.

And I think from the beginning it was obvious, but until the housing market got straightened out, we weren't going to turn around. And the housing market is still a disaster. I mean, every single day you read more stories about people walking away from their debts, about more foreclosures, about housing starts being weak.

So until that situation is solved, this is going to go on. This is going to take a long time.

VELSHI: And, Stephen, let's go back to you on this. You've studied this well, you've written about it. What is the sustainable answer? I mean, stimulus was never meant to be a sustainable answer. Tax cuts are on the table. Extending those Bush tax cuts for some people and not others is on the table. What exactly is America going to do for the long term because I don't -- I can get past the next year or two if I know that in five years we're on the road to success?

MOORE: Yes. That's a really good point, because even if you're in favor of stimulus, and I always thought it wasn't going to work, but even if you are, it's not a long-term growth strategy. And I think one of the things that has businesses and workers so worried right now is that they don't see a plan to make the American economy grow rapidly over time.

Now I -- you're not surprised, Ali. I like the old Steve Forbes idea of a flat tax. Get tax rates as low as they are anywhere in the world to bring capital and jobs back into this country. I think it would be like rocket fuel for this economy. And then we've got to get federal spending under control, something that is just so important in terms of bringing down this trillion dollar-a-year debt.

VELSHI: All right. Let's talk about it. I mean, over the next few months, as we head toward elections you're going to hear a lot about taxes. Let's also just talk about the jobs, because we know our polling says that this is the single biggest issue.

In fact, if we had half the unemployment rate that we have right now, the tax cut issue wouldn't be as big an issue, the debt issue wouldn't be as big because people would be earning and paying taxes.

Let's look at the first seven months of this year in terms of jobs. We were growing. We were adding jobs each month. And in the last two months we reversed course. And even that job growth at the beginning of the year, some of it wasn't coming from the sources that a strong economy should be getting its jobs from.

A lot of those jobs were government jobs, Census jobs. Unemployment, 9.5 percent. If we could slash that in half, I submit to you, Diane, we would have a lot fewer problems, whether it's about tax cuts, whether it's about deficits or debt.

ROGERS: The growth in the jobs that we've seen over the past few months has been fueled primarily by the government sector. And that's actually what stimulus is supposed to do. I mean, when the private sector isn't able to spend because they don't have the money, government becomes the spender of last resort.

And I think that was the strategy. That's the traditional strategy in stimulus is when consumers and businesses can't borrow, the federal government can still borrow. So the federal government is the only one who can contribute immediately and directly to GDP.

(CROSSTALK)

ROGERS: You know, I think that -- sorry.

VELSHI: Sorry, go ahead. Finish your thought. ROGERS: I mean, I think that over the longer term, we need the private sector to start taking over the jobs. But, you know, the government's budget balance cannot go indefinitely with these large deficits because that will directly reduce national saving.

VELSHI: Joe, what's your view on this? Whose job is this? Who's going to be the one to do the -- to make the first move to say this economy is a good opportunity, I'm going to invest, I'm going to hire people, I'm going to build a factory? What's the mood as far as you tap into it?

QUEENAN: Well, the mood of consumers is a sort of terror because you know people who have been forced to sell their homes. You know people who have been out of work for several years. My son had a job last year for eight months. That made him a celebrity among his age group. Because I go to the Y on Mondays and play basketball with 23-year-old boys, 23-year-old boys should not be playing basketball at 12:00 on a Monday. They should be working.

And that whole thing spreads out. If it's happening where I live, which is a fairly affluent place, it's happening all throughout the society. And it's worse among poor people, it's worse among working- class people, and it just adds a kind of terror.

And I want to add one other thing. All of these stories you read about scaling back and about getting rid of things and about not buying as much stuff, that's great. That's a great sort of New York Times Sunday style story, and it makes people feel good. But this economy is built on consumers buying stuff.

So if we start being like people living in the mountains, like hermits, the whole thing is going to go.

VELSHI: Yes. You're absolutely right about that. And you know, one of the things -- one of the reasons why we feel secure about buying things is because there has been some sense in this country for the last 75 years that no matter what happens, your future will be taken care of, at least a part of it, and that's because of Social Security.

Well, it's broken. Everybody has got a solution for fixing Social Security. Stephen, Diane, and Joe, we're going to hear your simple solutions. It's not a simple problem. And then we're going to talk to the man who is in charge of Social Security and get his take on it.

Plus an argument for why allowing folks to lose their homes to foreclosure is actually a good thing.

(COMMERCIAL BREAK)

VELSHI: Social Security will take in less money this year than it will pay out in benefits for the first time in nearly three decades. The program's trust fund, which is designed to handle this kind of deficit, will run out of money in 2037. Now with the future of our nation's retirement system unclear, we want to ask our panelists about their solutions. I want to keep it tight. Give me your sense of what you think they first need to address. Diane, let's start with you. What does Washington to do to keep Social Security afloat?

ROGERS: Well, they need to start talking about the tough choices, which involves either benefit cuts, or tax increases, or some combination of both. And they need to recognize that the cash flow deficit -- cash flow turning into a negative is taking a drain. It's a drain off of other users of government spending.

VELSHI: Stephen, what do you think?

MOORE: Yes, the math here is very simple, Ali. You have got increased unemployment, so fewer workers are now paying into the system just at the time when Baby Boomers are about to retire and they're going to put a huge drain on the system as they pull out funds.

And so we need to do something I think to raise the retirement age, certainly makes a lot of sense. I'd also like to see options for young workers like personal accounts.

VELSHI: All right. Joe, you were just talking about those 23-year- old boys that you play basketball with. Do people in their 20s and 30s, should they really believe that Social Security is going to be there for them when they retire?

QUEENAN: No, I don't think so. I mean, my daughter called me up a few weeks ago and asked me what she should be doing with her money. She's 26. And she already kind of knows that it's every man for himself.

VELSHI: Yes. All right. Well, maybe that's a better idea. Let's talk to the guy who runs the operation. This month marks the 75th anniversary of Social Security. We've got the person in charge right here with us. Michael Astrue is the commissioner of Social Security. He joins us now.

Thanks for being with us. Good to see you.

MICHAEL ASTRUE, SOCIAL SECURITY COMMISSIONER: Thanks for inviting me.

VELSHI: You -- I saw something you had written which was about how you had been working in Social Security for a long time. It's 75 years old. And you end by saying that, you know, productivity there is up, backlogs are down, the infrastructure is being replaced, you're excited about the next 7 5 years of Social Security, and others should be too.

Have you met anybody who's excited about the future of Social Security?

ASTRUE: Actually, I am when they have the facts. And unfortunately there's a lot of mis-reporting going on and I think it's discouraging younger Americans.

VELSHI: What's the mis-reporting? ASTRUE: Well, the mis-reporting is this. And this is what I stressed in my remarks after the trustees' report. The actuaries use the term "exhaustion" for when we cannot pay full benefits. But that does not mean that there's nothing there. And that's the perception among younger Americans.

The truth is if you see the report that we have, even if nothing happens, enough to pay about 78 percent of the full level of benefits. Now, that's not as good a deal as what older Americans have had in recent years, but that's still not nothing and that's not a reason to assume that there'll be nothing there.

This is a very fixable problem. It will mean some choices that will be difficult, but we still have a long time frame to do it. It will be easier if these things are phased in over time. And what's important, once the Simpson-Bowles commission reports in December, is that we have a civil, fact-driven debate about what we're willing to...

(CROSSTALK)

VELSHI: All right. Well, let's just take it from what I got. I got a letter -- I'm sure everybody got it, the Social Security statement. And you've written something on the front there. I want to just put it up on the screen, the message that was in there about what you just said.

It said: "By 2037 the Social Security trust fund will be exhausted and there will be enough run to pay only about 76 cents for each dollar of scheduled benefits."

So the word "exhausted" is in something you've sent out. And, right, so...

ASTRUE: But it's also -- you know, last year's investigation was 76. It's up to 78 percent this year going forward.

VELSHI: All right. I just got this -- I got this a week ago in the mail.

ASTRUE: Right. And so we try to make sure -- the reason we put the actual percentage in there is so that people will be clear about what "exhaustion" means. And the problem is that there are people who are trying to sell doom and gloom and translate the term "exhaustion" into being there's no money left, there's no money for younger Americans.

And that's really unfortunate because people like Mr. Queenan's daughter are assuming that there's going to be nothing there for them. And I think that's really misleading.

VELSHI: OK. Well, let's -- I think you're right about how people feel about it. A new CNN poll about this shows that 60 percent of Americans who are not currently retired don't think they'll be able to rely on Social Security when they reach retirement age.

And let's address that. The way that question was phrased is, will you be able to rely on Social Security? Should people who are not retired be thinking that they should be able to rely on Social Security or should Social Security be supplementary?

Because you're arguing that 76, 78 percent, I might get that, which means I might have to supplement it somehow.

ASTRUE: Well, it was never designed to -- Social Security was never designed to pay full retirement needs for every American. It was meant to be part of an overall plan for retirement that included private savings, that included pensions.

And what it has done, it has been a very successful program. Before it started, over half of all older Americans lived in poverty. Now fewer than 10 percent of all American senior citizens live in poverty.

It has been very successful, but no American should make the assumption that it will provide for all their retirement needs. And that's why the savings rate needs to be significantly higher than it has been in recent years.

VELSHI: Obviously it's a real privilege to have you here. So I asked some of our viewers to post some questions for you on my Facebook page, which they did. Let's take a quick break. You'll come back and talk about some of the options for fixing Social Security, whether it's increasing the retirement age and some of the questions that my viewers have.

Stay with us.

(COMMERCIAL BREAK)

VELSHI: Michael Astrue joins me again. He's the commissioner of Social Security; he has been with that program for a long time. He's here to set the record straight because he feels some people misconstrue the dire straits in which we all think Social Security might be. So I have asked our viewers Michael to submit a couple of questions.

Ann says, "I'm a hard-working 41-year-old. Why can't they guarantee -- I guess they means you - why can't they guarantee that I'll get 100 percent of my payback when I retire? It's distressing to read that I may only get 75 percent of my money back. That is un-American. Your response, Michael.

ASTRUE: Well I think that's fairly characteristic of most Americans. Most of American like Social Security, believes in Social Security, would like the program to have a fair amount of continuity. Unfortunately most of the attention seems to be focused radical reforms on the right and left and I just don't think those are going to happen. And so I think the important thing after Simpson Bowles is for the Congress to get serious as they did after the Greenspan commission in the early '80s, sitting down and really getting trying to figure out exactly how we're going to adjust the system to make sure this viewer's happy. And I think that's what ought to happen. I think it will happen. It will take some time. It will be painful but we need to get -- VELSHI: When you're talking about Simpson and Bowles, you are talking about Allan Simpson former Wyoming Senator and Erskine Bowles who was appointed by the president to form a commission to look into this and get answers by December as to what the government should be doing about Social Security. Let's take a question from Adam on Facebook.

"He says, I want to know where did the money go and what plans do you have to ensure the growth and stability of the program?" You sort of addressed that a moment ago. Steven Moore said are there serious considerations being given to raising the retirement age. What do you think? You're sort of saying we'll wait for Bowles and Simpson, but what do you think should be done?

ASTRUE: Right now I think the important thing is to wait for the report and then engage in the debate. There's a relatively limited amount of choices. Theoretically there are three things. You raise revenue, you cut benefits or you change your investment strategy. I don't think the third is on the table, I think Americans like the stability of having Treasury bills and the security of that as the means of investment. So then the question is exactly how do you raise revenue, how do you reduce benefits?

There are lots of different ways to slice and dice that but they fit into a fairly small number of groups and Congress needs to get serious about sitting down and trying to figure out what the trade-offs are and come up with something going forward that will give people the same level of benefits or approximately the same level of benefits that they have in the past. And again, one thing we should realize in some ways we're dealing with the good problem because most of what has happened here is because we're living a lot longer. All the advances in medicine we are much more likely to live into our 80s and 90s or even 100 then we were when Social Security Act started in 1935. So we're dealing with the good problem. We're healthier, we're living longer, and now we have to figure out how to adjust the system --

VELSHI: The most optimistic man in America about Social Security, Michael Astrue, thank you for being with us. We'll have you back, probably around when this report is coming out so we can flush through it a little bit, and we can talk about it with our viewers again.

ASTRUE: Sure. I'll be glad to come back. You know where to find me.

VELSHI: Very good, thank you sir.

Let's go back to our panel. Stephen Moore, Diane Lim Rogers, Joe Queen and David listening to this conversation. Stephen, your first thoughts on what you first heard?

STEPHEN MOORE, EDITORIAL WRITER, "WALL STREET JOURNAL:" I'm not as optimistic Ali in the future of this program as Michael is. One of the problems is that he didn't address is that about a trillion dollars has been basically stolen from the trust fund by politicians over the past 20 years, Republicans and Democrats to use it for military weapon systems, education programs and so on and that is unrecoverable. I still like the idea of looking at some kind of an alternative to Social Security for young workers. Why not create like an IRA for young people. If they could put 7 or 8 percent from now until they retire into a personal IRA. My god, we'd have a nation of pension millionaires.

VELSHI: Diane, what do you think?

DIANE LIM ROGERS, CHIEF ECONOMIST, CONCORD COALITION: I happen to be more optimistic about Social Security and I think we should preserve the public assurance aspect of the program as Michael mentioned. The program isn't broken, you know. The program is just going to start costing us money on that and it is a choice, it is a choice of our society whether we are willing to put more resources towards Social Security. The fact that the trust fund will run out and only be able to pay 75 percent of benefits, that doesn't mean we can only pay 75 percent of benefits. We could choose to pay 100 percent of the benefits.

VELSHI: But you have to get that money from some point.

ROGERS: Right.

VELSHI: You make an interesting point. It's not broken. It's underfunded; I guess you can use that to describe --

ROGERS: Like everything else in government.

VELSHI: Or even some of our own lives. It doesn't mean it is broken, it just means that you have to -- Michael Astrue may have oversimplified it but he said it very clearly. You either increase your revenue or cut your expenditures.

MOORE: But there's an important point here Ali, which is for young people, any one under the age of 30, Social Security is going to the worst investment you make in a lifetime and if you increase the tax and reduce the benefits for young people which are doing this, you're saying I'm going to take this bad deal for you and I am going to make it even worse.

VELSHI: Quick answer from you, Joe?

JOE QUEEN: Well, you're saying to young people, your dad may get 100 percent of the benefits and you're going to get 78. How is that fair? How does that play out when you explain that to people? You can make all the arguments that you want about well it's underfunded but it is not in trouble but they're looking at it and just saying, no. I'm going to be 86 when the funds run out but my kids are going to be here for a long time and they're the ones that are going to get left holding the bag.

VELSHI: There it's not fair, Joe. What's fair? Good to have you all there. Stephen a pleasure to see you as always. Diane thanks for joining us today on the show.

ROGERS: Thanks for having me.

VELSHI: OK, great discussion. Thank you. More and more Americans are losing their homes to foreclosure. Why some people are saying that is actually a good thing.

(COMMERCIAL BREAK)

VELSHI: More foreclosures in July to the tune of 325,000 properties and more than 20 percent of the nation's mortgage borrowers are under water. That means the owe more than their homes are worth. Realty Track estimates that more than a million Americans will lose their homes this year.

Most people wouldn't think that is a good thing but some people think it is. Some people think the market should be allowed to correct itself. Others think the government should continue to help out, to put band aides on some of these bad loans and help to keep people in their homes so that those homes don't end up on the market.

Stephen Leeb is the author of "Game Over." Stephen you have said you don't see how it would help the economy to let homeowners lose their homes.

So what is the best strategy here considering that we continue to see more of these foreclosures and one way or the other it cost us?

STEPHEN LEEB, AUTHOR, "GAME OVER": Well I think, Ali, what we have to face up to in this economy today is that we're very close to deflation. The Fed this week basically said they're going to continue with quantitative easing. Letting and allowing people to leave their homes and basically not allowing them to stay in their homes those bolstering home prices I think brings us even closer to deflation and brings us very close to a phenomenon where lower prices feed on themselves.

We right now face a crisis of spending in this country, believe it or not. Our savings rate is already up to 6.5 percent. And my guess is it would go dramatically higher and that we would really be facing the possibility and I hate to say this of a depression if we don't fight these deflationary forces. I think instead this country, government and business alike, should be focused on building additional industry. I think we're facing a war in this country, not a fighting war but a war on energy. And we've got to start building alternative energies. That's what I think.

VELSHI: I hear you but I want to stick with foreclosures and what action we should be taking specifically in terms of the government. Peter Schiff is the president of Euro Pacific Capital, he is the author of the "Little Book of Bull moves in Bear Markets" and there's a thinking out there that the housing market needs to be cleansed of bad loans. Peter in a way that our viewers will understand that don't follow this as closely as you do, give me 60 seconds on your view on this.

PETER SCHIFF, PRESIDENT, EURO PACIFIC CAPITAL: First of all, savings is in a crisis. We need savings if we're ever going to have new industry.

But as far as foreclosures, look people shouldn't be in homes that they can't afford. Foreclosure doesn't mean that people are homeless. It just means they move out of houses they can't afford and they rent something that they can afford and taxing one taxpayer to put money in another taxpayers hands so he can live in a house that he can't afford is not only unconstitutional and immoral it is bad economics. You don't want people in homes where they have no equity. They don't take care of them, they don't maintain them, and they lose even more value.

Now Obama has an even worse plan. He wants to give unemployed homeowners, who are under water access to another $50,000 in non recourse gifts basically so they can make their mortgage payments, their taxes, and their insurance for the next two years. This is a gift, not only is this going to hurt the housing market but it creates another powerful incentive for the people unemployed not to look for work.

VELSHI: Hang on a second.

Going to go back to Peter, Stephen Leeb for a second. Stephen, give me a prescriptive, 30 seconds. What action should be taken now to try and help this housing market? I should tell our viewers the median price of a single family home right now that is sort of the homes we all live in, the median price is up a little bit from last year and of course mortgage rates are the lowest they have been on record. What should change if anything?

LEEB: I think that Obama's plan is not a bad plan. I think that we have to protect the prices of homes right now.

SCHIFF: Prices didn't go down. They're too high.

LEEB: I think that anything we do that's deflationary risks a depression. Anything that we do that doesn't recognize the fact that this country is really on the verge of self-destruction is very, very dangerous.

SCHIFF: Steve you can't try to reflate the housing bubble. The problem is housing prices are too high. People can't afford them.

LEEB: Peter, the problem is -- as you said, not allowing people to look for work like people that are unemployed in this country don't want jobs --

SCHIFF: They don't want jobs, no --

LEEB: That is the craziest thing I've ever heard.

SCHIFF: Please, it's not crazy. Steve, if you're going to get $2,000 a month from the government for your mortgage payment, another 2,000 of unemployment, hold up. Be quiet for a second.

LEEB: Peter, you be quiet for a second.

VELSHI: I can't be here if we don't have people who pay for us. We have to go to a commercial break. Stephen Leeb and Peter Schiff with very different views about the economy. Take a look at these four letters that I'm about to show you while these guys are talking. The four letters, B-R-I-C. if you don't want to stick around and learn about them, you are making a mistake, because these could be the key to the future of your money.

(COMMERCIAL BREAK)

VELSHI: BRIC, these four letters could be crucial to your money. BRIC stands for Brazil, Russia, India, and China. What do these countries have in common? They're all emerging economies. Why does it matter to you? Because you can easily invest in them. Should you? How do you do it? And how much should you invest in those countries?

Let's ask the expert. Stephen Leeb is back with us; also joining us from London is Richard Quest, host of CNNI, "QUEST MEANS BUSINESS."

He spends a lot of time dealing with developments in these countries. Richard let's start with you. It is an overused word people talking about growth in the BRIC economies given that we don't have growth in western economies, developed economies as much. Is this in your mind the place where smart money invests?

RICHARD QUEST, CNNI HOST, "QUEST MEANS BUSINESS:" Not only should the smart money invest in a balanced portfolio, it must invest in pension funds, any form of retirement account is hoping to get some form of gain. Look, this is the latest report that I got a few weeks ago from HSBC. These show the numbers, Ali. You talk about growth rates in Brazil of 7 percent, Russia of 4 percent, India of 8.5 percent, China of 9 or 10 percent, those sorts of growth rates are essential if a portfolio is going to make developments.

VELSHI: Stephen, you're really one of the people we talked who has such a great international perspective on this sort of thing. Where do you think people should be standing on having investments in BRIC countries in their own portfolio and we'll tell our viewers in a second how you would do that if you're going to?

LEEB: OK, Ali, I totally agree with Mr. Quest. I think that it's essential to invest in BRIC and for reasons that you said at the beginning. Developed countries, their markets have been terrible. If you look out over the past ten years for instance and you look at the performance of the BRIC stock markets they are up on average about five or six-fold. If you look at our performance we are down, now I'm not counting dividends. If you count dividends, you know the numbers are a little bit different.

This is not accidental, this is as I think Richard said because they have fabulous growth rates but this is a zero sum gain. These countries are developing and because they're developing they're using tremendous amounts of resources. Oil prices, they've come down a little bit, but at $75 they're up about three or four-fold since the beginning of the decade. That's because oil is needed by the BRIC countries. Those oil prices, those copper prices, also the same story across the board with commodities, represent taxes on the developed countries and that's one of the reasons we've done so poorly. Our stock market has done poorly and I think we'll --

VELSHI: Richard's making noises. What are you going on about Richard?

QUEST: I'm not working on that one I'm afraid.

LEEB: Then you're not paying attention to the data.

QUEST: It's too simplistic to suggest that it's a zero or not a zero sum gain and that because commodity prices are higher it's a transference of wealth. The truth is that they are emerging markets, the higher cost reduction markets in the west.

LEEB: I have no idea really what that means but what I do know is if you went back ten years and you asked every economists around and said give him this scenario, how things starts in the U.S. half million, no increase in energy demand or oil demand, where are oil prices going be, the answer would have been 10 to $15. The answer for copper would have been under $1. Now those increased oil prices, the fact that you're pay $3 dollars at the tank right now means that oil prices, energy prices have gone from 4 to 10 percent of the typical consumer's pocketbook. That is a deduction in median income and that's one reason we got into a lot of trouble in 2008.

QUEST: You cannot -- you cannot lay the price of oil at its current $75 to $80 a barrel clearly at the door of the emerging markets --

VELSHI: Of the three of us you travel to most of them. You've been in China, you have been in Russia, India, and you've seen people in India going from rickshaws into small cars or in China, people getting their first cars from bicycles to cars. That's got to be a big part of the demand for oil that we've seen in the last few years.

QUEST: Yes, but the argument that you're other guest is putting forward is that because they are growing at such a speed its detriment of the develop --

LEEB: It totally is.

Richard, what energy prices in this country go from 4 percent of a person's pocket book to 10 percent and that person is not using any more energy, that's a massive tax. The median income in this country is something around $50 grand. That doesn't allow you to pay for your kid's education. Take another 6 percent out of that and that's probably the biggest tax over the decade that we've experienced in this country.

VELSHI: So this is the best of all worlds. This is the best of all worlds. We have disagreement on why but we have agreement on the fact that yes, in fact, you the viewer actually do have to diversify your portfolio to ensure that you've got some exposure to these BRIC countries, Brazil, Russia, India and China.

What we'll do in coming weeks is we'll discuss the specifics of these countries. What's good or bad about them and how to take that and carry it forward to help you make some money? Thanks to both of you, Richard Quest and Stephen Leeb.

Well, there's been a big change in the friendly skies and on the ground as well. Why getting from point a to point b might be taking a little less time for you these days when we come back. (COMMERCIAL BREAK)

VELSHI: Time now for the ticker where we break down some of the big headlines from the week. Back with us now, Joe Queenan and Richard Quest, and joining us now CNN correspondent Mary Snow. This first story is made for all three of you.

We've heard about Steven Slater, the JetBlue flight attendant who dramatically exited a flight and quit his job after a confrontation with a passenger earlier this week. Slater has been hailed as a working-class hero, he has been called the next Joe the plumber, rumors of a reality show, multiply Facebook fan pages, tens of thousands of supporters.

Steven Slater is a hero or is it all hype? Why this is a perfect conversation? Joe Queen you can't make this stuff up and you specialize it stuff you can't make up. Richard, you were the only guy I know who travels more than I do. And Mary, you're from Brooklyn where being rude doesn't really set you apart from anyone.

MARY SNOW, CNN CORRESPONDENT: That's true. Brash is part of our middle name. This story is unbelievable. In less than 24 hours he's been declared a folk hero. And you know a few days later now, I had to shake my head when I heard that he actually wanted his job back at JetBlue. All these stories are coming out about whether or not he really was, you know, rude to passengers on the plane. So I think this is more all hype.

VELSHI: As you know, I use a plane like some people use a bus. I commute every week and frankly I get tired of people trying to put bigger stuff in the overhead compartments then they should, people who stand up and break all the rules. My instinct Richard, while I wouldn't want a flight attendant being rude to me, was that you know what maybe somebody needs to put their foot down.

QUEST: Hey, look. How many times do people know that you don't get up until the plane has come to a standstill? I mean how many times do people have to -- why do people want to take steamer trunks on to aircrafts and shove them in the overhead commandment. Look. There's a limited amount of space. We all have to get on. As for the Steven Slater, the fact is this was a man who was on obviously in emotional distress. This was not a premeditated. This was not some great desire to rush forward and carry the torch for the working man and woman.

This was a cry of help and disaster. And I'll tell you one other thing. You wouldn't have wanted your mother, your brother, your uncle or your aunt to have been standing outside that aircraft when that slide deployed on top of somebody's head.

VELSHI: Joe, here's the problem. They have rules that I don't understand like why I have to turn off my blackberry because it somehow interferes with their billion dollar navigation system. So I guess what happens you start saying you don't have to listen to anything they say because they don't know what they're talking about. QUEENAN: I think this is a total con job of this guy and I can't stand him. I can't stand the whole thing of every time we look for a working-class hero we find a clown; we find a phony like Joe the plumber. There are 320 million smart intelligent sophisticated, great people in this country and every time we look for a folk hero, we find a jerk like this.

First of all, I'm not flying that airline ever until they get their human resources. How did this guy get a job flying in the air? Every time you are on a plane I look at that thing and I figure, who's watching that? Can somebody just open that? Here's a guy that made flying even more terrifying, not just for passengers, but for every single person who works as a flight attendant. All those people who do a great job all around the world, he's made the job; I hope they send this guy to jail for 700 years. VELSHI: We have a split decision on this. Let me tell you about this, we all know being on a plane is a stressful experience. Some people is it is stressful start to finish and for me you know that stress comes when you sit and you are waiting and waiting and waiting. So these new federal rules were put into effect at the end of April to cut down on the lengthy tarmac delays and they seem to be working.

In the U.S., Richard, listen to this, airlines reported just three flights in June with tarmac delays of three hours or more, that is the cutoff, after that you pay $27,500 per passenger as a fine. June, last year, 268 flights sat on the ground for more than three hours before takeoff. The airlines all warn that if they impose this rule, there are going to be cancellations across the board. It didn't happen. It actually sounds like the skies are getting a whole lot friendlier, a lot more efficient. Richard.

QUEST: Nah, nah, nah. You're taking a couple of numbers. You're taking one swallow and you're making a summer. What you're not looking at is exactly over the long term. What is going to happen to schedules? What is going to happen to frequencies? Yes, I agree with you, Ali, it is a miserable existence to be stuck on an airline. You're not getting LaGuardia being multiply scheduled so planes will be taking off on top of each other. I think there is a long way to go before you can claim victory on this one.

VELSHI: I don't know Mary; $27,500 per passenger if you keep them there for more than three hours seemed to work swimmingly. No more cancellations than last year. Frankly, I think you're one of these people; you fly a lot you have to be sitting there in an airport, looks like improvement to me.

SNOW: Yes, but look at where we start from. This says that there are improvements, that there are fewer planes sitting on a tarmac for three hours. Three hours. So how many planes are sitting there just sly of three hours? I think there is still such a long way to go. You know, consumer complaints or customer complaints up overall, though, despite the backdrop of this.

VELSHI: Let me move on to another story. This one I was following last week and getting a lot of coverage. Supermodel Naomi Campbell looking not as sparkly as usual. The war crimes trial, I couldn't even get my head around this. The war crimes trial of the former Liberian President Charles Taylor. She testified that she received a package of very small, dirty, greasy-looking stones after a dinner at Nelson Mandela's mansion back in 1997.

She figured they were diamonds. So what does she do? She turns them over to somebody who apparently represents a children's charity. The super model now taking criticism for remarking on the stand that her appearance at the trial was a big inconvenience. This is a trial for Taylor who is on trial for receiving these blood diamonds, allegedly, in return for army rebels in Sierra Leone. Make sense of this for me, Richard.

QUEST: The sense about this, it's a nasty business relating to blood diamonds, genocide, torture. But the crucial thing, that's the trial that has been going for three years but, Ali, this week we got an insight into the celebrity world of fashion when Naomi Campbell misspeaks and says it's a big inconvenience to go to a war crimes trial. Her agent, her former agent basically is accused of attending a blood diamond party and, frankly, the entire thing becomes so besmirched in unpleasantness of what celebrity life must be that you really wonder what everyone was thinking. As for the blood diamonds, those diamonds, the guy who got them kept them!

VELSHI: Didn't hand them over to the charity.

QUEST: No. They've only now just turned up and been handed to the authorities.

QUEENAN: Let me get this straight. OK, because I can't follow this trial. I don't understand what is involved, but the whole idea that now we have discovered that an aging super model is venal and crass and selfish and stupid, stop the presses. Stop the presses on that one. I had no idea that this was the way supermodels acted. That this was the way supermodels behaved.

VELSHI: Good point. I guess that makes sense. Listen, Joe, good it see you, as always. Mary Snow thanks for being with us. What a crazy story that JetBlue story is. Richard, don't go anywhere. Richard and I have something to tell you, something big, and something you do not want to miss on CNN. We want to talk to you about it and we want you to tweet about it and, most importantly, we hope it's a segment you'll get involved in.

(COMMERCIAL BREAK)

VELSHI: All right. Before we go today I want to bring Richard Quest back on and I want to tell you about something that we're going to do every week in my daily show which airs between 1:00 and 3:00 pm Eastern and Richard's daily show which is on CNN International, what time is it, Richard, for our international audience?

QUEST: It is 7:00 London, 8:00, 21:00 Central European Time.

VELSHI: All right. So we are going to do this in both of our shows once every Thursday, it's called "Q&A" -- stands for "Quest & Ali" or "Question & Answer." Richard, tell our viewers what it is about.

QUEST: It is really simple. You, the viewers, choose the subject that Ali and I have to talk about informatively and educationally. We have to give you the details on a subject that you want to know about for one minute each and then things get really interesting, Ali.

VELSHI: Then we go head-to-head. Somebody, our voice asks us questions to see how smart we are and we go head-to-head against each other. We want you to check us out every Thursday. Go to our website, CNN.com/qmb is Richard and CNN.com/ali is mine. Enter your question and we'll answer those for you. Richard, great to see you, as always.

QUEST: And to you, Ali. You can also tweet questions at my twitter name is Richard Quest.

VELSHI: Or @Alivelshi. You can get to us any way you want. We want to answer your questions. Richard, have a good one.

We hope to see all of you every weekday in the "CNN NEWSROOM" at 1:00 p.m. Eastern and every Saturday 1:00 pm Eastern and every Sunday at 3:00 p.m. Eastern right here for YOUR $$$$$.

Tweet early and often @alivelshi, @richardquest, @christineromans and you can also logon 24/7 to CNNMONEY.com. Have yourselves a great weekend.